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Capital gains tax and self assessment

When you dispose of (usually meaning sell) certain things you own, you might get charged "capital gains" tax. Basically, it's a tax on the profit you make when you sell it - not its actual value. When you sell something that counts for capital gains tax, you file a self assessment tax return to declare the profit.

If you decide to sell your business, or some of its assets, Business Asset Disposal Relief (previously known as Entrepreneurs’ Relief) allows you to pay a reduced Capital Gains Tax rate and maximise your profits when you sell up

When you sell or exchange cryptocurrencies, any profits made may be subject to capital gains tax on crypto in the UK.

Capital gains taxWhat kinds of things count for capital gains tax?

You generally don't need to worry about selling your personal possessions, unless they're worth £6,000 or more. We're mostly talking about things like jewellery, antiques, valuable artworks and so on here. If you sell something like that for £6,000 or over, you need to work out what profit you made on the sale.

Property is obviously another big capital gains area. This doesn't usually include your main home, unless you use it for business or let it out. You'll also need to tell the taxman about things like sales or shares and business assets.

ISAs, PEPs and things like Premium Bonds and lottery wins are exempt. Also, if you inherit something, you'll probably only have to worry about capital gains tax if you sell it later. If you don't use your car for business, selling that won't count either.

Another odd exemption is for items with a lifespan of under 50 years - although again, that changes if it's something used for business. Of course, your tax-free personal allowance still counts, so if your profits stay under that, you don't have to pay anything.

Working out Capital Gains TaxHow do I work out what I have to pay in Capital Gains Tax?

For every asset you're disposing of, add up the profit you've made on it. If you've actually made a loss on some of them, include that in your calculations. Those losses count against your “total taxable gains”, bringing your tax bill down. In fact, you can even claim losses on things you still own, if they've become essentially worthless for some reason. Ask RIFT about the rules around this, to see if they apply to you. Also, there are a few kinds of asset where you use the market value to work out your gains. Again, we'll take care of this for you if you need help.

You can actually make claims against losses for up to 4-years, so there might still be time if you haven't reported them in previous years. However, there are strict rules about what qualifies as a loss. HMRC won't usually let you claim losses when you give or sell something to a family member or “connected person”, for instance. As always, RIFT will set you straight if you're confused about any of this.

Capital gains on tax giftsWhat if I gave something away or swapped it for something else?

You don't normally have to pay capital gains tax on gifts to your spouse or to a charity. Other than that, though, swapping or giving things away still counts as "disposing" of them. Also, getting "compensation" for something, like an insurance claim if it's destroyed, still counts.

Overseas assetsWhat if I'm abroad or have overseas assets?

Capital gains tax can still apply if your assests are overseas. There are specific HMRC rules about this, so check with RIFT if you are unsure. A lot of it comes down to whether you're 'domiciled' in the UK or claim the 'remittance basis'. Don't worry if this all sounds like a foreign language, we'll talk you through it.

If you're abroad yourself, you'll pay tax on gains from residential property in the UK, even if you're 'non domiciled'. You'll probably be off the hook for Capital Gains Tax on other kinds of UK assets though. However, that's only if you're not returning to the UK for over 5 years.

Capital Gains Tax RestrictionsCan I still give or sell my partner assets without Capital Gains Tax? Are there any restrictions?

There are a couple of situations where you'll still get stung for Capital Gains Tax when dealing with spouses or civil partners. If you're giving them goods to sell on in their own business, for instance, capitals gains rules apply. Also, if you've been separated and didn't live together for that entire tax year, you'll still have to pay the tax. Remember that, either way, if your partner then disposes of the asset, they'll have to pay tax on it. Generally, that'll be based on its value when they got it from you.

Self Assessment and Capital Gains TaxIs Self Assessment the only way to report capital gains?

HMRC does have a “real time” Capital Gains Tax service you can use at any time. It's only worth doing this if you don't already have to send in a tax return, though. If you're using Self Assessment at all, you'll have to report the gains again in your return anyway.

Getting helpThis sounds complicated. Can I get help?

Of course! The capital gains rules can be tricky to grasp, with easily missed exemptions, allowances and reductions to watch out for. As always, get in touch with RIFT if you've got questions. We're here to keep the taxman honest, so call or email to find out how we can help.

You can read more about what tax records you should keep and tax codes on our site or get in touch with us at any time and we'll be happy to help. Or, check out our guide on common tax return mistakes to avoid any blunders ahead of the Jan 31st deadline. In the meantime why not find out if you are due a tax rebate and get in touch with us by calling 01233 628648 or take our very quick test below to see if you are due a tax rebate from HMRC.

Tax Returns

Want moreRead our guide - Capital gains tax advice

This article is designed to help you:

Get to grips with the basics of Capital Gains Tax
Make the most of your tax situation
Keep on the right site of HMRC

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Capital gains tax and self assessment​